When you’re declared bankrupt, the assets in your estate are categorised into one of two types:

  • divisible assets, which can be sold by your Trustee
  • non-divisible assets, which are protected and can’t be touched by anyone else.

These classifications are applied to all assets on the date of bankruptcy, and are detailed in Section 116 of the Bankruptcy Act 1966.

However, certain sections of the Act provide exemptions for things such as vehicle thresholds and tools of the trade.

What are non-divisible assets?

Here are some examples of property and assets the Act considers to be non-divisible:

  • Property you hold on trust for others.
  • Household property.
  • Personal property that:
    • has sentimental value
    • is a type of property described by the Bankruptcy Regulations
    • is identified by a special resolution of creditors before the Trustee realises such property.
  • Property you use to earn your income up to a limit specified in the regulations ($3,700 as at April 27 2016), or that is identified as a resolution passed by either the creditors or an order by the court.
  • Property you use primarily for transport, providing the aggregate value doesn’t exceed the amount specified in the regulations ($7,600 as at April 27, 2016).
  • Life insurance policies, superannuation policies and approved deposit funds (subject to several other sections).

This list is by no means exhaustive. But it does give you a guide as to what assets are generally considered non-divisible amongst a bankrupt’s creditors, or have limitations placed on them.

What about property acquired after bankruptcy?

Any property you acquire after you’re declared bankrupt is known as ‘after-acquired property’, which is dealt with under another section of the Bankruptcy Act 1966. Here’s how Section 58-1-(b) of the Act outlines the term after-acquired property:

“after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.”

Here are some examples of after-acquired property in bankruptcy:

  • This is money you receive as the beneficiary of a deceased estate.
  • Lottery winnings. While it may not happen often, any money you win vests with the Trustee.
  • Gifts of a significant value.
An important note

If you purchase non-exempt/dividable assets during your bankruptcy, you may be held to the acquired property after your bankruptcy as happened in the case Rodway v White***.

So even after you’ve gone through the bankruptcy process, some of your assets can still be sold by a trustee.

As you can see, being declared bankrupt doesn’t mean you’ll lose everything. But if you’ve declared yourself bankrupt, or are considering it, then you need to know how to best protect your assets?both now and in the future.

And that’s where we can help.

Get in touch with us today, and let us help you take the mystery out of what might happen to your assets during and after bankruptcy.

***Note: In the case of Rodway v White [2009] WASC 201; [2009] 233 FLR 262, this issue was discussed where the Bankrupt purchased shares with his income (after his compulsory income contributions). It was held by Heenan J that the conversion of income into shares did result in the acquisition of after-acquired property, and so the shares vested with the Trustee of the estate.